Question 2

The following are the inventories for the years 2016, 2017, and 2018 for Parry Company:

Problem 19-19 EPS; options; restricted stock; additional components for "proceeds" in treasury stock method [LO19-1, 19-2, 19-4, 19-8, 19-11]

Witter House is a calendar-year firm with 430 million common shares outstanding throughout 2018 and 2019. As part of its executive compensation plan, at January 1, 2017, the company had issued 60 million executive stock options permitting executives to buy 60 million shares of stock for $12 within the next eight years, but not prior to January 1, 2020. The fair value of the options was estimated on the grant date to be $2 per option.

In 2018, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 20 million restricted common shares to senior executives at January 1, 2018. The shares vest four years later. The fair value of the stock was $16 per share on the grant date. The average price of the common shares was $16 and $20 during 2018 and 2019, respectively.

The stock options qualify for tax purposes as an incentive plan. The restricted stock does not. The company's net income was $280 million and $290 million in 2018 and 2019, respectively. Its income tax rate is 40%.

Required:
1. Compute basic and diluted earnings per share for Witter House in 2018.
2. Compute basic and diluted earnings per share for Witter House in 2019.

(For all requirements, do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places (i.e., 10,000,000 should be entered as 10.00).)
  

Edit: Nothing from the question is missing

Problem 3-13 Preparing Standardized Financial Statements [LO1]

Please show work

Sachs Brands' defined benefit pension plan specifies annual retirement benefits equal to: 1.6% × service years × final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2004 and is expected to retire at the end of 2038 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $99,000 at the end of 2018 and the company's actuary projects her salary to be $325,000 at retirement. The actuary's discount rate is 9%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What is the company's projected benefit obligation at the beginning of 2018 (after 14 years' service) with respect to Davenport? (Do not round intermediate calculations. Round your final answer to nearest whole dollar.) 2. Estimate by the projected benefits approach the portion of Davenport's annual retirement payments attributable to 2018 service. 3. What is the company's service cost for 2018 with respect to Davenport? (Do not round intermediate calculations. Round your final answer to nearest whole dollar.) 4. What is the company's interest cost for 2018 with respect to Davenport? (Do not round intermediate calculations. Round your final answer to nearest whole dollar.) 5. Combine your answers to requirements 1, 3, and 4 to determine the company's projected benefit obligation at the end of 2018 (after 15 years' service) with respect to Davenport. (Do not round intermediate calculations. Round your final answer to nearest whole dollar.)

McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2018, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other journals were used. The following is a recap of the cash receipts and disbursements made during the year.

You are called in to prepare financial statements at December 31, 2018. The following additional information was provided to you:

1. Customers owed the company $19,500 at year-end.
2. At year-end, $29,750 was still due to suppliers of merchandise purchased on credit.
3. At year-end, merchandise inventory costing $47,000 still remained on hand.
4. Salaries and wages owed to employees at year-end amounted to $5,250.
5. On December 1, $3,300 in rent was paid to the owner of the building used by McGuire. This represented rent for the months of December through February.
6. The office equipment, which has a 10-year life and no salvage value, was purchased on January 1, 2018. Straight-line depreciation is used.

Required:

Prepare an income statement for 2018 and a balance sheet as of December 31, 2018. (For Balance Sheet only, items to be deducted must be indicated with a negative amount.)

PROBLEM

1

XYZ

Company

acquired as a long

-

term investment $440 million of 8% bonds,

on July 1,

2018

, and

management has the positive intent and

ability to hold the bonds until maturity

(three years, until

June 30

, 2021)

. The market interest rate

was 5% for bonds of similar risk and maturity.

XYZ

paid

$500 million for the bonds;

it

will receive interest semiannually on June 30 and December 31

.

a)

Prepare the journal entry to record

XYZ

’

s

investmen

t in the bonds on July 1, 2018

.

b)

Prepare the journal entries by

XYZ

to record interest on December 31,

2018.

c)

At what amount w

ill

XYZ

report its investment in the December 31,

2018

, balance sheet?

d)

Suppose KP’s bond rating agency upgraded the risk rating of the bonds, and

XYZ

Com

pany

decided to sell the investment

on January

1

, 2019

, for $520 million. Prepare the journal entry

to record the sale.

PROBLEM

2

ABC

Company buys and sells debt securities expecting to earn profits on short

-

term differences in

pri

ce. The company’s fiscal year ends on December 31. The following selected transactions relating

to

ABC

’

s

trading account

s

occurred during December

2017

and the first week of

2018.

2017

Dec.

12

Purchased 50 Simco bonds at par for $175,000

28

Received interest of $1,000 from the Simco bonds

31

Record

ed adjusting ent

ries relating to Simco bonds;

market price was $4,000 per bond

2018

Jan

.

02

Sold the

Simco bonds

for $197,500

a)

Prepare the appropriate journal entry for

each

transaction.

In the blank to the left of each question, fill in the letter from the following list which best describes the presentation of the item on the financial statements of Helton Corporation for 2018.

W. Change in accounting principle

X. Change in accounting estimate

Y. Correction of an error

Z. None of these choices

_____ 1. Raiders manufacture heavy equipment to customer specifications on a contract basis. On the basis that it is preferable, accounting for these long term contracts was switched from the completed-contract method to the percentage-of-completion method.

________2. As a result of a production breakthrough, Raiders Co. determined that manufacturing equipment previously depreciated over fifteen years should be depreciated over twenty years.

------------3. Raiders changed from LIFO to FIFO to account for its finished goods inventory.

--------4. During 2011, Raiders determined that an insurance premium paid and entirely expensed in 2010 was for the period January 1, 2010, through January 1, 2012.

----------5. In 2018, the company changed its method of depreciating plant assets from the double-declining balance method to the straight-line method.

-------- 6. During 2018, a long-term bond with a carrying value of $4,600,000 was retired at a cost of $4,900,000.

---------- 7. After negotiations with the IRS, income taxes for 2016 were established at $45,900. They were originally estimated to be $38,900.

---------- 8. In 2018, the company incurred interest expense of $39,000 on a 20-year bond issue.

--------- 9. In computing the depreciation in 2016 for equipment, an error was made which overstated income in that year $70,000. The error was discovered in 2018.

---------- 10. In 2018, the company changed its estimate of bad debt expense from 3% to 4%.

The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $86 million.

Required:
Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2018. Use the indirect method to present cash flows from operating activities because you do not have sufficient information to use the direct method. You will need to make reasonable assumptions concerning the reasons for changes in some account balances. A spreadsheet or T-account analysis will be helpful. (Hint: The right to use a building was acquired with a seven-year lease agreement. Annual lease payments of $7 million are paid at January 1 of each year starting in 2018.) (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)

the comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $60 million.

Required:
Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2018. Use the indirect method to present cash flows from operating activities because you do not have sufficient information to use the direct method. You will need to make reasonable assumptions concerning the reasons for changes in some account balances. A spreadsheet or T-account analysis will be helpful. (Hint: The right to use a building was acquired with a seven-year lease agreement. Annual lease payments of $8 million are paid at January 1 of each year starting in 2018.) (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)

The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $88 million.

Required:
Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2018. Use the indirect method to present cash flows from operating activities because you do not have sufficient information to use the direct method. You will need to make reasonable assumptions concerning the reasons for changes in some account balances. A spreadsheet or T-account analysis will be helpful. (Hint: The right to use a building was acquired with a seven-year lease agreement. Annual lease payments of $8 million are paid at January 1 of each year starting in 2018.) (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)